The use of foreign currency derivatives, corporate governance, and firm value around the world

Allayannis, George; Lel, Uǧur; Miller, Darius P.

doi:10.1016/j.jinteco.2011.12.003

Cited by 152 publications

(155 citation statements)

References 103 publications

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“…No obstante, la mayor parte de los trabajos asocia la política corporativa de cobertura con un mayor valor de empresa, toda vez que esta política genera un premio por cobertura. En este caso, Allayannis, Lel y Miller (2012) estudian empresas no financieras de 39 países, y encuentran que el uso de derivados de divisas para empresas con alta exposición al tipo de cambio y fuertes mecanismos de gobierno corporativo se encuentra asociado con un premio por cobertura. Igualmente, Mackay y Moeller (2007) reportan una relación positiva entre el valor de la empresa y el uso de instrumentos derivados para la industria del petróleo.…”

Section: Revisión De La Literatura E Hipótesisunclassified

“…X it corresponde a un vector que representa un conjunto de variables de control. Siguiendo trabajos anteriores (Allayannis y Weston, 2001;Allayannis, Lel y Miller, 2012;Bartram, Brown y Conrad, 2011;Belghitar, Clark y Judge, 2013;Fauver y Naranjo, 2010;Saona, 2014, entre otros), se han incluido el tamaño de la empresa (TAM) medido como el logaritmo natural del valor libro del total de activos, el nivel de endeudamiento (DPAT), medido como el valor libro de la deuda sobre valor libro del patrimonio; la rentabilidad (ROI), medida como la utilidad operacional sobre valor libro de los activos; el nivel de inversión (CAPEX), medido como gasto de capital sobre valor libro de activos; el uso de dividendos excedentarios (DDIV), medido por medio de una dummy que toma valor 1 si la empresa paga dividendos mayores a 30% de las utilidades y 0 en caso contrario; diversificación industrial (DIVER), medida como la cantidad de sectores industriales en los que la empresa posee ingresos y la concentración de propiedad (PROP1, PROP3 y PROP5), medida por medio del porcentaje de propie- Las dos últimas variables de control utilizadas, volatilidad del flujo de caja (VOLATIL) y exceso de caja (EXCAJA), se han incorporado de manera que se controle la potencial exposición a riesgos, mitigables por medio de derivados, así como sus beneficios.…”

Section: Muestra Variables Y Metodologíaunclassified

“…En su artículo seminal Allayannis y Weston (2001), para una muestra de empresas norteamericanas, encuentran que el uso de instrumentos derivados de tipo de cambio aumenta el valor de las empresas, debido principalmente a que estos instrumentos reducen la carga impositiva, los costos de quiebra y la subinversión. Posteriormente otros autores (Allayannis, Lel y Miller, 2012;Belghitar, Clark y Judge, 2008;Choi, Mao y Upadhyay, 2013;Graham y Rogers, 2002;Guay y Kothari, 2003;Jin y Jorion, 2006;Nguyen y Faff, 2010) han investigado esta relación; sin embargo, a la fecha la evidencia no es concluyente.…”

Section: Introductionunclassified

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Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Cid

Bertín

Maquieira³

et al. 2017

El Trimestre

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Background: The use of derivative instruments, as corporate policy to hedge financial risks has a positive impact on the firm value. However, in countries characterized by weak legal protection of the investors' rights and ownership structures highly concentrated, like in Chile, majority shareholders could use this policy to extract wealth from minority shareholders. Methods: Using the Generalized Method of Moments (GMM), this paper analyzes a panel of 133 nonfinancial companies listed on the Santiago de Chile Stock Exchange between 2008 and 2013. Results: The results indicate a positive and statistically significant relationship between the amount of derivatives used and the company value. However, this evidence is conditioned when the majority shareholder (s) keep the control of the company. If the main shareholder or the three major shareholders hold more than 67% of the outstanding shares, then the relationship between the amount of derivatives used and firm value is negative. Conclusion: In analyzing the dynamics between the ownership concentration and the use of derivatives, we findout that when the majority shareholders and the

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Section: Revisión De La Literatura E Hipótesisunclassified

Section: Muestra Variables Y Metodologíaunclassified

Section: Introductionunclassified

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Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Cid

Bertín

Maquieira³

et al. 2017

El Trimestre

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“…The first to investigate the contribution of hedging to firm value in a broad sample of firms from 39 countries over the years 1990-1999 were Allayannis, Lel, and Miller (2012). Their findings suggest that corporate governance plays an important role in assessing the value of risk management.…”

Section: Related Literaturementioning

confidence: 99%

Is value creation consistent with currency hedging?

Búa

González

López

et al. 2013

The European Journal of Finance

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This paper analyzes value creation through currency hedging in the Spanish market. The results show that the hedging with derivatives generated an average premium of 1.53% and that foreign currency debt generated 7.52%, with respect to company value approximated by Tobin's Q, while operational hedging does not affect company value. Moreover, in half of the observations corresponding to companies that hedged with derivatives, the value premium was between 0.08% and 0.99%. In the case of foreign currency debt, the range was between 1.79% and 10.37%. It demonstrates that the contribution of currency hedging to company value fluctuates considerable according to the volume of financial hedging. Thus, an empirical study of this aspect which only analyses the decision to hedge through dummy variables to define financial hedging, as empirical previous studies, can lead to biased results in terms of estimated premium amounts, because it assumes a homogenous treatment of companies regardless of hedging volumes. The European Journal of Finance 913This paper aims to provide an answer to the question of whether using currency hedging is a value adding corporate activity in the Spanish market. 1 We focus our analysis on financial hedging instruments that are derivatives and foreign currency debt. We also examine operational hedging associated with geographic diversification. 2 This paper makes three major contributions to the literature regarding. First, to our knowledge it is the first empirical research to specifically target the Spanish market. Furthermore, there is only one previous empirical study in the Eurozone. Clark and Mefteh (2010) investigated the relationship between foreign currency derivatives use and firm value on a sample of French firms in 2004. However, we also study the impact of foreign currency debt and operational hedging use on value creation over the period 2004-2007. Most research has focused on the US market (Allayannis and Weston 2001; Allayannis, Ihrig, and Weston 2001; Graham and Rogers 2002; Gleason, Kim, and Mathur 2005), while there are only two previous studies focusing on the British market (Clark and Judge 2008; Belghitar, Clark, and Judge 2008). Eurozone is the main source of imports. However, 40.9% of imports came from non-EU countries in 2007 and there are countries that pose a significant turnover as are China, the USA and UK. China is the major source of Spanish imports outside the EU and the fourth Spanish supplier in 2007.Second, many studies focused only on financial hedging with derivatives. Our research has included foreign currency debt and operational hedging. Although Allayannis, Ihrig, and Weston (2001) also studied foreign currency debt and derivatives, they did not identify the value premium associated with each financial hedging instrument. Only Clark and Judge (2008) distinguished these value premiums, but these authors only included the operational hedging as a control variable. In addition, most previous studies used dummy variables as proxies for currency hedging. Howev...

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“…As observed by [15], foreign currency hedging premium is statistically significant and economically large for firms that have strong internal and external corporate governance. [39] also show that firms with strong corporate governance use derivatives in beneficiary ways to the firm. One of the most important aspects of derivatives control is Board-level approval (Grant& Marshall [34]).…”

Section: Interest Rate Exposure Exchange Rate Exposurementioning

confidence: 90%

The Impact of Corporate Governance on Derivatives Usage–Empirical Evidence from African Non-Financial Firms

Osuoha

Samy

Osuoha

2015

BJEMT

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The study investigates the impact of corporate governance on derivatives usage in African nonfinancial firms. Using a sample of 760 African non-financial firms from 17 African countries, the study shows that derivatives usage among African non-financial firm is very low. The study finds that the main reasons why most African firms do not use Derivatives are lack of knowledge about derivatives, absence of organized derivatives market and absence of derivatives experts. The results also show that Board composition is the strongest measure of corporate governance impacting derivatives usage. Derivatives usage increases with increase in the number of executive directors but has an inverse relationship with the board size. Derivatives user firms have strong corporate governance in place to mitigate the risk of derivatives misuse that could hurt the firms.

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The use of foreign currency derivatives, corporate governance, and firm value around the world

Cited by 152 publications

References 103 publications

Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Is value creation consistent with currency hedging?

The Impact of Corporate Governance on Derivatives Usage–Empirical Evidence from African Non-Financial Firms

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